Economic ‘plan’ is no reform blueprint and comes with a very big ‘if’ in the small print

The latest in a number of glossy documents produced by the Government promises to “point the way” towards a stable future “and away from the boom and bust that has cost us so dearly”.

Given the shock of the last economic crisis, and the history of how we always walk blindly back into the next one, any document that shows a clear path out of this vicious circle is one that should be framed in every household in the country.

But the Medium Term Economic Strategy published yesterday is more of an aspiration of where the economy is headed between now and 2020 and a commitment the Coalition will do its best to abide by tighter spending rules.

The report, and its launch by three ministers and the Taoiseach at Government Buildings, are also more ways of ensuring the Government’s political message that things are improving under its watch.

Like many similar documents, it is high on rhetoric and low on specifics; full of worthy promises and devoid of concrete ways on how to deliver on them.

“Ireland has learned the hard way,” it says, and “must not repeat the mistakes of the past” when public finances were exposed to excessive risks.

The plan to ensure this does not happen again essentially breaks down to three “pillars” which make up an “overall reform programme”.

These involve: ensuring the national debt is sustainable, ensuring credit is available through a fixed financial system, and supporting employment.

The report’s diagnosis of the problem is correct. We already know that the country’s debt is €200bn, which is 120% of our GDP.

And we know this must be reduced if the country can successfully borrow on the private markets, but the only way of reducing it is to ensure GDP goes up with economic growth.

The economic plan predicts that this will all work out. It says the debt to GDP ratio will peak this year, and fall to 100% of GDP by 2020.

This economic growth will be helped by the fact that unemployment will have fallen to 10% that year, it predicts.

But this all depends on a very big “IF” contained in the appendix to its figures, which outlines the baseline scenario on which the plan is based.

This shows how reliant the figures are on positive figures, based on annual GDP growth rising from 2% next year to over 3.5% per annum by 2017.

“Risks to domestic and international demand make medium-term forecasts subject to a high level of uncertainty,” it cautions, but continues to use the positive figures anyway.

What policies, then, are the Government planning under the “Strategy for Growth” to ensure it delivers what it says on the tin?

The 66 pages propose a number of “actions” including: getting people back to work, tackling the cost of legal services and making them more transparent, finding non-bank sources to fund small and medium enterprises, and requiring banks to get on with the task of tackling the mortgage arrears problem.

Much of these “actions” have already been demanded by the bailout troika or — in the case of mortgage arrears and legal services reform — are long overdue already.

As well as a shortage of new plans, there is also a lack of detail on how the “actions” will be implemented — something that would prove just how serious they are.

Government sources said a more extensive document, with a breakdown by sector was planned, but agreement could not be reached at cabinet so they opted for more of a general oversight.

It does hold out the promise of more promises in the future: A new Public Service Plan Covering 2014 to 2016 will be published early in the new year, outlining cost-cutting reforms.

A Comprehensive Review of Expenditure will be undertaken in advance of the 2015 budget, which will inform its decisions on the following four budgets.

This week’s report, the Government claims, will “set Ireland on the path to sustainable prosperity” and create an economy that can “survive and thrive”.

But as it attempts to draw a line under a painful chapter of our economic history and marks the exit from the bailout, it fails to offer any deep rooted reform that would ensure we don’t go back there again.

Such a promise was contained in the Programme for Government which said the failures of the political system itself, “were a key contributor to the financial crisis and the system must now learn those lessons urgently”.

It said “Government is too centralised and unaccountable” and promise to “radically overhaul the way Irish politics and government work”.

Three years on and the crisis almost forgotten, it seems to have forgotten its promised reform of the political system that allowed bad government in the first place.

That, rather than another report of more promises, would have ensured the boom and bust cycle could be put clearly behind us.

Greek gift

By Juno McEnroe

Athens will get €126m from Irish Central Bank.

The Cabinet agreed yesterday that Ireland will pay Greece €126m over the coming years as part of a previous deal arranged to slash Greek debt.

As Ireland has now officially left the bailout programme and is again an ordinary euro member, it must comply with an agreement to help bail out Greece.

As part of the debt forgiveness scheme, the funds will come from the Irish Central Bank and be given to Greece gradually from next year until 2025, a Government spokesman said.

The measure essentially means that profits from bond yields are being returned to Greece.

Legislation to allow for the returned money is expected to be revealed today, he said.

The deal only applies to Greece and not to other member states in bailout programmes, the spokesman added, and the payments will not affect exchequer figures.

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